Any potential new courthouse building on the Island of Geese would take up no more than a quarter of the overall site in Tralee.
An update on the former Denny site was presented to the monthly meeting of Tralee Municipal District.
Tralee Municipal District Manager, Michael Scannell told councillors at the MD meeting that discussions are ongoing between the council, Courts Service and OPW on the matter.
The negotiations also include the condition of the existing courthouse on Ashe Street and possible future uses for the building.
Mr Scannell says the development of the public realm space, which includes an outdoor events centre, has been delayed due to COVID-19 restrictions.
He said work is also underway on a social housing project for the site and funding is being sought for a community facility.
Mr Scannell said the council is also in talks with An Garda Síochána to open up the area around Tralee Garda Station including removing the boundary wall to create a plaza.
He said this will improve the look of the area and create a strong link between the town centre and the Island of Geese site.